Three separate reports published by economic experts warn a separate Scotland
would require deep public spending cuts and lead to higher interest charges
for mortgage holders

Scottish independence would herald a new wave of painful public spending cuts, an increase in mortgage costs and a eurozone-style currency crisis, economic experts have warned amid claims “the penny is finally dropping” about the dangers.

City analysts from Goldman Sachs and Berenberg, a German-based multinational bank, published reports concluding a Yes vote would force Scotland into deeper austerity, requiring a “significant reduction in the provision of public services” to gets its finances in order.

In a separate analysis, Iain McLean, professor of politics at Oxford University, predicted every Scot would be £480 worse off under independence now thanks to sharply declining oil revenues.

All three agreed that a separate Scotland would pay a higher interest rate on its borrowing, an additional cost that would be passed onto borrowers and mortgage holders.

David Cameron yesterday warned this hike would be even higher if Alex Salmond made good his “chilling” threat to refuse to accept a share of the UK’s national debt, adding the consequences would be “crippling” for the Scottish people.

Goldman Sachs also predicted a Eurozone-style financial crisis could hit both Scotland and the remainder of the UK, with uncertainty over a currency union causing a run on assets and deposits based north of the Border.

Alex Salmond has claimed the three main UK parties are bluffing by ruling out a formal deal to share the pound but the global investment bank concluded the warning was “credible”.

The reports were published the day after the pound slumped as panic swept the money markets over an opinion poll showing the No lead has shrunk to only six points.

This prompted Danny Alexander, the Chief Secretary to the Treasury, to state yesterday: “The penny is finally dropping about the pound, and the reality of the true dangers of independence is beginning to dawn (on people).”

The YouGov survey showed increasing numbers of Scots think they would be better off after independence and the future of the NHS would be brighter if they vote Yes.

But Goldman Sachs warned a separate Scotland faces a “significant budget adjustment” to make its finances “sustainable” as it currently receives much higher public spending from the Treasury thanks to the Barnett formula.

As Scotland has a more rapidly ageing population than the UK as a whole, Kevin Daly, the bank’s senior economist, said this advantage would likely increase over the coming decades if there is a No vote.

“Filling this gap in the event of independence would be painful and is likely to require a significant reduction in the provision of public services. In the long run, an independent Scotland would likely have a smaller public sector,” Mr Daly said.

However, he said the most worrying risk was that uncertainty over the currency would lead to a eurozone-style crisis after a Yes vote but before Scotland had seceded from the UK.

He disagreed the UK parties were bluffing over rejecting a currency union, saying the euro crisis shows that such an arrangement needs “political and fiscal integration”. “It is difficult to see the rest of the UK agreeing to provide a monetary and financial backstop to Scotland,” he added.

Even if a deal could be reached, the Goldman Sachs analysis concluded the threat of it breaking up “would provide investors with a strong incentive to sell Scottish-based assets, and households with a strong incentive to withdraw deposits from Scottish-based banks.”

Although the Bank of England could step in to “prevent the worst” consequences of a bank run before Scotland left the UK, it said the bank could not “credibly commit” to this after separation had occurred.

Mr Daly also warned that a narrow No victory on September 18 could lead to calls “reasonably quickly” for another referendum to be staged. Berenberg agreed a separate Scotland’s financial position would require “significant further austerity”.

“Government borrowing costs would be higher and there would probably be economic disruption from a new Scottish currency … Overall, we judge that the few years following the vote would be tough but not calamitous,” it said.

The analysis said both governments would want a quick deal for a “velvet divorce” but suggested that Mr Salmond would have to make the most concessions as the Scottish economy “would be the epicentre of any downturn”.

In a report sent to the Daily Telegraph, Prof McLean said official figures show that if Scotland separated now its finances would be £2.5 billion deeper in the red than if it remained part of the UK thanks to falling oil revenues.

This would mean each Scot paying an extra £480 in tax if they wanted to maintain the current standard of public services, he said, or making cuts to spending on the NHS, education system or the state pension.

He said it was impossible to say whether a separate Scotland would be wealthier in the long term, as this would depend on the policies adopted by its government, but “everyone” would have to pay higher interest on their loans and mortgages.

“What is sheer magical thinking is that people will be better off on Independence Day, with more to spend on the NHS. On the latest available numbers, they will be worse off, with less to spend on the NHS unless they cut spending somewhere else,” he concluded.

He sent the analysis as Alistair Darling used a visit to Aberdeen, during which he spoke to oil industry leaders, to warn that independence would mean putting Scotland’s schools and hospitals at the mercy of “a volatile and declining resource”.

Mr Darling, the leader of the pro-UK Better Together campaign, highlighted a report by the impartial Institute for Fiscal Studies (IFS) warning that Scotland would have to make an additional £6 billion of spending cuts and tax increases in the first years of independence.

The former Labour Chancellor said: “Independence wouldn’t put an end to austerity – it would make it worse.”

Jackie Baillie, a Labour MSP, added: “This is half the NHS budget in Scotland. It's no wonder Goldman Sachs say the cuts would be painful.”

Ian McDougall, board member of the pro-separation Business for Scotland group, said: “It's our reasoning, and clearly Goldman Sachs' reasoning, that it's in Westminster's best interests to move quickly to agree a currency union. Anything else would be tantamount to cutting off their nose to spite their face.”